BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II (A231)

MINI CASE 4:
INVESTMENT PROPERTY

DUE DATE: 30 NOVEMBER 2023

Guidelines for submission:

1) Please answer all questions.

2) Please write your name, matric number, group on the header and page number on
the bottom of your answer document.

3) The mini case is an individual task; however discussion is allowed, but copying other
student’s answer is forbidden.

4) Your answer should be handwritten and subsequently scanned with a scanner or

mobile scanner apps in a combined PDF file. The scanned document must be clear,
easily readable, and complete. Photo is not allowed.

5) Submit your scanned answer via Online Learning portal →

within the allotted time and period, before 12.00 mid night, 30 November 2023
(MYT). Only one submission will be accepted.

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QUESTION 1

Alansar Bhd is involved in real estate activities by buying lands and constructing housing
properties. The company main office is located in Kepala Batas, Penang. The company was
established in year 2015. In February 2019, the company bought a piece of land in Alor Setar for
RM2,300,000. The company keeps the land for capital appreciation. The fair value of the land at
31 December 2021 was RM3,000,000. On 31 July 2022, the company used the land for business
operation. On that date, the fair value of the land was RM2,800,000.

The company also has a 2-storey office building in Kepala Batas and it is used for administration
purposes. The building was purchased at RM30,000,000 on 30 June 2019. It is estimated that the
building will provide benefits to the company over its useful life of 50 years. No residual value
of the building is expected at the end of its useful life. The company policy is to use straight line
method to determine depreciation of building. On 31 December 2021, the recoverable amount of
the building was RM28,000,000. On 30 April 2022, the company ended the occupancy and
rented out the building. At that date, the fair value of the building was RM29,000,000.

In addition, the company has a 5-storey building located in the city center of Kuala Lumpur that
is used as its branch office. It was purchased in January 2020. The cost of the building was
RM50,000,000. It is estimated that the building will provide benefits to the company over its
useful life of 50 years. The management of the company rented out a significant portion of the
building. Only 5% of the building was used for ancillary services which was considered
insignificant. Based on the professional appraiser’s valuation, the market value of the building on
31 December 2021 and 31 December 2022 were RM48,000,000 and RM52,000,000 respectively.

Additional information:

1. The company uses cost model for property, plant and equipment (PPE) and fair value
model for its investment property.

2. Financial year end for the company is 31 December each year.

REQUIRED:
(Show all workings and round all numbers to the nearest RM)

(a) Prepare related journal entries for the land in Alor Setar for the years 2021 and 2022.

(b) Prepare related journal entries for the 2-storey office building in Kepala Batas for the years
2021 and 2022.

(c) Prepare related journal entries for the 5-storey building in Kuala Lumpur for the years
2021 and 2022.

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QUESTION 2

Berkat Bhd has two buildings, one in Alor Setar and another one in Sungai Petani, and one
freehold land in Pokok Sena. The building in Alor Setar is a four-story building and it was used
as the main office which was purchased on 1 July 2017 at RM5, 000,000. The building in Sungai
Petani is a seven-story building and is rented out. The cost of the building was RM8, 300,000 it
was purchased on 1 March 2018. The cost of the land in Pokok Sena was RM4, 000,000 and it
was purchased on 30 April 2018 with the anticipation of an increase in value in the future years
due to the economic development in the area.

However, the pandemic COVID-19 has changed the company operation. On 1 November 2020,
the company decided to occupy only a small portion of the building in Alor Setar as the main
office, and the rest of the building was rented out. The operation of the building in Sungai Petani
remains as of the end of the year 2020 (i.e. rented out). The land in Pokok Sena was sold on 30
September 2020 at RM4, 300,000. The cost to sell the land was RM100, 000.

Additional information:
1. It is estimated that building in Alor Setar and Sungai Petani will evenly provide benefits to
the company over its useful life of 20 years.
2. The company uses a cost model for plant, property, and equipment (PPE) and a fair value
model for its investment property.
3. Financial year-end for the company is 31 December each year.
4. Following are the market value of the property for the year-ends 2018, 2019, and 2020 based
on the professional appraiser’s valuation:

Property Fair value Fair value Fair value

2018 (RM) 2019 (RM) 2020 (RM)
Building in Alor Setar - - 4,400,000
Building in Sungai Petani 8,600,000 7,600,000 7,000,000
Land in Pokok Sena 4,500,000 4,700,000 -

5. On 1 November 2020, the carrying amount of the building in Alor Setar is similar to the fair
value.

REQUIRED:
(Round your answer to the nearest RM)

(a) Prepare related journal entries for the building in Alor Setar of Berkat Bhd for the years
2019 and 2020.

(b) Prepare the related journal entries for the building in Sungai Petani of Berkat Bhd for the
years 2018, 2019, and 2020.

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“End of Questions”